USD/JPY – Yen Soars as China Says May Slow US Bond Purchases

USD/JPY has taken a beating in the Wednesday session. In North American trade, the pair is trading at 111.44, down 1.07% on the day. It’s a quiet day on the release front, with no Japanese events on the schedule. In the US, Import Prices slowed to 0.1%, short of the estimate of 0.4%. On Thursday, the US releases PPI reports and unemployment claims.

On Wednesday, the yen has soared to its highest level since late November. The catalyst for the rally was a report China that it was considering slowing or halting the purchase of US government bonds. China boasts the largest currency reserves, estimated at $3 trillion. It is also the biggest holder of US government bonds, in the amount of $1.19 trillion. Why would China make this move? One reason is that it may consider US treasuries less attractive compared to other assets. As well, it could be part of China’s strategy to flex some muscle as a possible trade war looms between the US and China, which are the two largest economies in the world. The report has pushed US Treasury yields higher and sent the US dollar downwards.

In his first address of the New Year, Bank of Japan Governor Haruhiko Kuroda held the course, stating that the BoJ would continue “patiently” with its ultra-accomodative monetary policy, although he acknowledged positive economic conditions. Kuroda hinted that any changes in policy would be incremental, as he said that the deflationary mindset would not disappear easily. Kuroda is slated to end his 5-year term in April, but will he be staying on? The Japanese government hasn’t made up its mind, and Prime Minister Shinzo Abe said as much on Sunday. Abe said that Kuroda has met his expectations, but admitted that he had not made up his mind about the reappointment. With Japan posting seven straight quarters of growth and inflation moving higher, there’s a strong likelihood that Kuroda will be given the green light for another term at the helm of the central bank.

USD/JPY Fundamentals

Wednesday (January 10)

  • 8:30 US Import Prices. Estimate 0.4%. Actual 0.1%
  • 10:00 US Final Wholesale Inventories. Estimate 0.7%. Actual 0.8%
  • 10:30 US Crude Oil Inventories. Estimate -3.9M. Actual -4.9M
  • 13:01 US 10-year Bond Auction

Thursday (January 11)

  • 8:30 US PPI. Estimate 0.2%
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 246K

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, January 10, 2018

USD/JPY January 10 at 11:05 EDT

Open: 112.65 High: 112.78 Low: 111.27 Close: 111.48

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.21 109.11 110.10 111.53 112.57 113.55

USD/JPY posted slight losses in the Asian session and sharp losses in the European session. USD/JPY has steadied in North American trade.

  • 110.10 is providing support
  • 111.53 has switched to a resistance role following sharp losses in the Wednesday session. It is a weak line

Current range: 110.10 to 111.53

Further levels in both directions:

  • Below: 110.10, 109.11 and 108.21
  • Above: 111.53, 112.57, 113.55 and 114.59

OANDA’s Open Positions Ratios

USD/JPY ratio is showing little movement in the Wednesday session. Currently, long positions have a majority (52%), indicative of slight trader bias towards USD/JPY continuing to move lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.